Pyramid Schemes

While multi-level marketing firms are legitimate businesses, pyramid schemes are illegal in Montana, and the Securities Department investigates and takes action against them.

Unlike multi-level marketing companies, pyramid schemes are fraudulent because no goods or services are sold. Compensation is derived primarily from the fees paid by new recruits to the scheme. Participants have to recruit others to the plan to make money. As participants join, additional people must be recruited so that current participants can be paid. The pyramid eventually collapses because participants exhaust the pool of people available and willing to join.

You can read the statute that outlaws pyramid schemes in Montana here.